Where We’re Finding The Best Deals

If you’ve been following our real estate investing column, you know that since the beginning of April, Kim and I have been on a quest to find out where the cheese moved. 

At April’s foreclosure auction, we noticed a sudden and dramatic shift in the real estate market.  For reasons pointed out in earlier columns, the foreclosure auction is no longer the best place to find deals.  The low-hanging fruit is G-O-N-E!  (You can find our earlier columns here.)

We think the best way to find out where the cheese moved is to go to the frontlines.  For this reason, April’s goal is to meet face-to-face with 60 sellers.

I’m writing this on April 17, 2013.  Here are our results so far this month:  I’ve met with 35 sellers; we’ve found and bought a house on Green Acre Lane in Cartersville; we have a second house under contract (it’s a short sale deal); and we’re working to buy a third property before it’s sold at May’s foreclosure auction (it’s a subject-to deal.)

It’s astonishing how much and how fast the market has changed.  Since 2009, the foreclosure auction was THE place to buy.  Now, because of a huge increase in competition and a dramatic decrease in the number of foreclosure properties, the prices people are paying for foreclosures are increasing, while profit margins are tanking.  Scary stuff!

At the same time, all the bank-owned homes that have been sitting vacant for the past few years are quickly being gobbled up.  In fact, almost every bank-owned property I’ve called on this month was either recently sold, or is under contract.  Amazing!

The current market reminds us a bit of the 2003 to 2006 real estate market.  Back then, as the market began heating up, more and more “investors” showed up to bid at the courthouse steps.  Because so many investors were willing to pay such high prices for properties, Kim and I were rarely the high bidders at the foreclosure auction.

For this reason, most of the homes we bought were purchased directly from sellers.  Best of all, because we were buying directly from sellers, we were able to creatively structure and finance our deals.  On the steps, because you’re buying for all cash, the only deal-structuring tool you have is a big dang hammer!

Why is meeting face-to-face with sellers the best way to find deals in today’s market?  It’s a fact: The one constant in real estate is change.  Everyday, babies are born, people are dying, folks are getting married, couples are getting divorced, etc.  These kinds of changes can make it necessary for people to move, and move quickly!  In other words, change can create a real estate problem for people.  And what’s a real estate investor’s primary job?  To help people solve their real estate problems!

Next week, we’ll talk about how we found, structured and financed the deal we closed this month on Green Acre Lane.